Dutch governments between 1929 and 1943 were dominated by Christian and center-right political parties. From 1933, the Netherlands were hit by the Great Depression, which had begun in 1929. The incumbent government of Hendrikus Colijn pursued a programme of extensive cuts to maintain the value of the Guilder, resulting in workers' riots in Amsterdam and a naval mutiny between 1933 and 1934. Eventually, in 1936, the government was forced to abandon the gold standard and devalue the currency.
Numerous fascist movements emerged in the Netherlands during the Great Depression era, inspired by Italian Fascism or German Nazism. But, they never attracted enough members to be an effective mass-movement. The National Socialist Movement in the Netherlands (Nationaal-Socialistische Beweging, NSB) supported by the National Socialist German Workers' Party which took power in Germany in 1933, attempted to expand in 1935. Nazi-style racial ideology had limited appeal in the Netherlands, as did its calls to violence. At the time of the outbreak of World War II, the NSB was already declining, both in numbers of members and numbers of voters.
During the interwar period the government undertook a significant increase in civil infrastructure projects and land reclamation, including the Zuiderzee Works. This resulted in the final draining of seawater from the Wieringermeerpolder, and the completion of the Afsluitdijk.
"The new Reich has endeavored to continue the traditional friendship with Holland [sic]. It has not taken over any existing differences between the two countries and has not created any new ones."
German guarantee of neutrality, 6 October 1939
During World War I, the Dutch government under Pieter Cort van der Linden had managed to preserve Dutch neutrality throughout the conflict. In the inter-war period, the Netherlands had continued to pursue its "Independence Policy", even after the rise to power of the Nazi Party in Germany in 1933. The conservative prime minister Colijn, who held power from 1933 until 1939, believed the Netherlands would never be able to withstand an attack by a major power. Pragmatically, the government did not spend much on the military. Although military spending was doubled between 1938 and 1939, amid the rising international tensions, it constituted only 4% of national spending in 1939, in contrast to nearly 25% in Nazi-ruled Germany. The Dutch government believed it would be able to rely on its neutrality, or at least the informal support of foreign powers, to defend its interests in case of war. The government did begin to work on plans for the defence of the country. This included the "New Dutch Waterline", an area to the east of Amsterdam, which would be flooded. From 1939, fortified positions were constructed, including the Grebbe and Peel-Raam Lines, to protect the key cities of Dordrecht, Utrecht, Haarlem and Amsterdam, and creating a Vesting Holland (or "Fortress Holland").
In late 1939, with war already declared between the British Empire, France and Nazi Germany, the German government issued a guarantee of neutrality to the Netherlands. The government gradually mobilized the Dutch military from August 1939, reaching its full strength by April 1940.